Diageo NA sees ‘explosive growth’ of alcohol sales in e-commerce space

Debra Crew, Diageo North America President, joins Yahoo Finance’s Alexis Christoforous and Julia La Roche to discuss the company’s sales spike amid pandemic.

Video Transcript

ALEXIS CHRISTOFOROUS: We have seen COVID-19 accelerate the demand and need for curbside pickup and delivery across the retail sector. But one industry that's also had to adjust is the adult beverage industry, with demand for ecommerce soaring. Joining us to discuss how one alcoholic beverage company is adapting is the president of Diageo North America, Debra Crew. We are also joined by Yahoo Finance's Julia La Roche.

Good afternoon to you both. Debra, I think, you know, pre-pandemic, few people even knew they could buy alcohol online. Now, you've got one in three people using a platform to-- to buy their alcohol. What has ecommerce meant to Diageo's overall sales in North America?

DEBRA CREW: Yeah, I think, you know, you said it. Prior to COVID, I think less than-- if you look at early 2020, less than 2% of sales of total beverage alcohol was in ecommerce. And only one in three even knew-- were aware that you could buy alcohol online. I think at the height of the pandemic, you think of July 4 week, one in three purchases were-- were actually made on an ecommerce platform.

So it's been amazing for our business. It's still quite small, and of course it varies state to state. But many are saying that, you know, you get to 2024, you could see up to 7% of sales go through this platform. So just an explosive growth off of something that people didn't even know they could do prior to COVID.

JULIA LA ROCHE: Well Debra, Great to have you. And while we have you, I want to understand, you know, obviously tremendous growth, not just the ecommerce, but just in general for you all in North America. And what are the hot drink categories right now for you all? And where are you seeing that demand come from?

DEBRA CREW: Yeah, the first half of our fiscal, which was kind of the second half of the calendar year, we had top line growth of 12%. And that was really driven on some key categories. Tequila was definitely hot. All of our tequila brands grew extremely well. But probably, you know, the highest growth was Casamigos. We had something like 139% growth on Casamigos.

But Don Julio, which is our largest tequila brand, also grew 56%. So tequila was definitely a hot category for us. Whiskey was also amazing growth, particularly in American whiskey. So we've got a brand called Bulleit, which many people enjoy, I think 17% growth. So those were big areas.

And then, we've got emerging categories also, things like-- we call them ready to drink cocktails. So many of our largest brands like Crown Tanqueray, and Ketel One all have launched ready to drink, sort of in a can. You can have Crown and soda. You can have a Tanqueray gin and tonic. And those are also off to, you know, early days, but really taking off in sales.

ALEXIS CHRISTOFOROUS: Yeah, I wanted to talk more about this idea of cocktails in a can. I think it's something-- I don't know, mentally, I think I just need to, like, break through and try to give that a go. But what are you hearing from people? Why do they like it so much? Is it the convenience factor? Does it travel more easily, and is it more easily deliverable through services like Drizly?

DEBRA CREW: Yeah, I think what we're seeing is-- and we saw this before COVID, but certainly COVID, you know, just expanded this trend of convenience. People want to-- they don't necessarily want to drink more, but they want to drink better. And so I think that idea of, I can have a great cocktail, and it's easy and convenient to have, and I can have it at home or I can have it on the go, it's just one of these trends that sort of marries multiple things.

And then to your point, ecommerce platforms, it's now even easier to buy. So you know, it's just taking advantage of all of those trends. And you know, we're just seeing that people want more optionality in their ready to drink. It used to be if you want a ready to drink, you could just have beer. Now, you can have all sorts of cocktails as well, and people have really latched on to that trend.

JULIA LA ROCHE: Well, you know, Debra, as you were just kind of mentioning, we're talking about ecommerce, we're talking about convenience, also the at home occasions. I would like to get your take, though, on the away from home category, specifically with, you know, restaurants and bars, and some places still not being fully reopened, and what you all are doing to kind of help out. And can you talk to us about your outlook with that space when things do start to reopen? And do you think some of these trends that we were talking about earlier will be sticking going forward?

DEBRA CREW: Sure. You know, I mean-- you know, look, it certainly is true that the hospitality industry, you know, restaurants and bars have really been impacted. And one of the things that we're most proud of, aside from the financial results from the first half we've also-- Diageo launched globally $100 million-- we called it Raise the Bar, which is really all directed toward the hospitality industry in an effort to help them recover.

We specifically, in North America, last month launched with-- in conjunction with New York State, launched in New York State, Raise the Bar, where we're also giving out grants to help restaurants and bars as they try to, you know, in some cases winterize for your outdoor dining, or maybe other capital expenditures that they need to make in an effort to try to make business work during COVID. So it's definitely been a tough run.

I will say that we are seeing, as states open up, places like Florida, places like Texas, people are going back out. And so that's great to see. And certainly, as we looked at the second half, we're quite hopeful that this what we call on premise business will recover. And certainly, we're working with bars to come up with innovative solutions. So that way, when people come back to their bar, you know, they feel safe and they're excited by their experiences.

ALEXIS CHRISTOFOROUS: You know, Debra, beer sales have lagged across the industry when it comes to wine, and then cocktails, hard liquor. I know beer sales rose for Diageo, but not by as much compared to other categories. What's your outlook for the beer industry as we start to reopen?

DEBRA CREW: Yeah, well, we are-- we're definitely seeing spirits outgrow three times faster than beer. That being said, our business in Guinness actually had a really strong first half as well. And I think some of it is, Guinness was primarily-- most people, if you would have asked them, they would have thought they could only get Guinness in an Irish bar or pub.

And I think people discovered that, actually, we do have take home beer as well, and you can have a great Guinness at home. And so we really saw a good change of that business from on premise to at home. We sponsored Notre Dame this year so you know, the Irish, it was a perfect tie in. And we've also done some work with Joe Montana, and did a great ad that launched Super Bowl week as well.

And we're excited about going into St. Patrick's Day. So Guinness has done really well for us. And we're launching a Guinness Nitro Coffee, which is also fun. It goes to the experience of having different ready to drink offerings out there. So you know, if you're up for something different to try, I would definitely recommend the Guinness Nitro Coffee. It should be in a store near you soon.

ALEXIS CHRISTOFOROUS: Or just go to your nearest ecommerce platform like so many other people are.

DEBRA CREW: That's true.

[LAUGHTER]

ALEXIS CHRISTOFOROUS: President of Diageo North America, and our own Julia La Roche, thanks so much, both of you.